Advantages of Offering Your Employee a Settlement Agreements
Written by Leah Waller
Senior Employment Consultant Solicitor
Settlement Agreements are a popular choice for many reasons, especially when there is a dispute between an Employer and Employee but also on occasions of redundancy and dismissal.
So, what are the advantages of offering a Settlement Agreement?
A key factor in many decisions is certainty. Many of us would love to be able to predict the future and hindsight is a wonderful thing (or so the saying goes!)…
With a Settlement Agreement in place, you know (with certainty) that the employee signing the Agreement cannot bring, or continue, any claims (save for those specifically excluded) against the Company and potentially staff, employees and officers of the company depending on the wording of the Agreement. Such an action would put them in breach of the Settlement Agreement and the Agreement itself will usually protect you if such claims are pursued.
Once concluded, a Settlement Agreement brings you peace and knowledge that the matter is concluded, at an end…finished. This can be extremely satisfying (not to mention the sense of relief) where a situation has been particularly tricky.
A big consideration for many businesses is COST…whether in relation to employment disputes, terminations or just in general!
Defending a claim in the Employment Tribunal can be costly and concluding matters by way of a Settlement Agreement, even with the accompanying legal advice, is likely to be significantly cheaper and more cost-effective.
With a Settlement Agreement you have more control over the package being offered (rather than it being awarded by a Judge at a Tribunal) which can help with finances and budgeting.
The majority of Settlement Agreements can be concluded within just a couple of weeks, even with proper consideration and both parties taking the necessary (and required, on the part of the employee) legal advice.
In contrast, Employment Tribunal claims can run into months until concluded, not to mention the significant delays being faced at the moment.
Another consideration, when thinking about time saving, is that when offering a Settlement Agreement, it may negate the need to carry out a formal process. Formal processes are often required when considering a disciplinary, performance management or redundancy situation but a Settlement Agreement may avoid having to carry out such a process, saving a lot of time, money and resources.
Another key aspect of a Settlement Agreement, as oppose to a Tribunal Claim, is that the Agreement terms and discussions leading to the Agreement will be confidential.
This not only protects your business from unwanted negative attention, from the media, staff and anyone else that may be interested in a Tribunal claim brought against your company but also prevent any derogatory and adverse comments.
A Settlement Agreement can specifically prevent the employee signing the Agreement, from making any adverse or derogatory comments about the Company, officers and employees that could have the effect of bringing the Company, employees or officers into disrepute. This can be extremely useful, especially where an employee is leaving in unfavourable situations (although many companies put this into their standard Settlement Agreements as a matter of course).
Conversations in relation to Settlement Agreement can be ‘protected discussions’ and this means that whilst the Agreement is being discussed and negotiated it cannot be brought up or discussed in any open forum such as an Employment Tribunal or ongoing proceedings and processes.
This is very useful in meaning that you do not compromise the company’s position and means that formal processes (if commenced) can continue, should they be required, if the employee does not sign the Settlement Agreement.
However, as always a little word of warning for employers…you must ensure you act properly in the course of your Settlement Agreement discussions and not in a discriminatory manner and thus we would always encourage seeking legal advice before entering into such conversations.
We act for BOTH Employers, in drafting Agreements and negotiating from the Company perspective, and Employees in ensuring that the Agreement is legally valid and offers a fair deal.